Beginner Series - Flips In Today's Environment

The Real Estate Espresso Podcast

Beginner Series – Flips In Today’s Environment

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Welcome to the Beginner Series – Flips in Today’s Environment

Today, I am excited to present an informative beginner series dedicated to flipping. Aimed to provide high-quality information to our listeners who mostly manage large portfolios of apartments and for beginners interested in the realm of real estate. We’ll be touching aspects that may give even the most experienced investors a fresh perspective!

A Look at House Flipping in Today’s Market

Recent conversations denote a shift in investor focus from multi-family units to house flipping. Factors that favor house flipping include the possibility of purchasing distressed properties at deep market discounts, shortage of finished homes, low cost of construction labor materials, and rapid property turnovers in the open market. The main attraction here is the allure of short-term projects turning a quick profit.

However, in the domain of real estate, you need clarity on the income source. Here, flipping garners income in three ways: earned income, residual income, and capital gains. And those conducting the business are firmly in the earned income category. Therefore, you need to engage in transactions continuously, as halting deals results in income cessation.

The dynamics of economics play a vital role in flipping. U.S. statistics reveal a 79% increase within four years in the income required to afford a medium-priced home, an issue even in the Canadian market. This impacts the housing affordability, making renting more viable than homeownership, impacting the flipping market.

The Reality of Flipping:

While flipping seems feasible for quick bucks, it’s essential to consider certain factors. Today, even half of the selling properties go below asking price. The question is whether the assumption of a quick exit in flipping is valid, and the money invested is safe. Not to mention, there may be delays and cost overruns, and the immediate profits are not always guaranteed.

Surprisingly enough, flipping is not true real estate investing but a manufacturing business using existing homes as inventory. Plus, the profit is not capital gains but a forced appreciation. Most importantly, residual income can only be attained if you have a large enough flipping business to maintain a self-sustaining management system to generate steady revenue streams.

Checklist for Flipping
Understanding the dynamics of house flipping and its market.
Continuously engaging in transactions to keep the income flowing.
Evaluating affordability and impacts in housing market dynamics.
Assessing the possible delays and cost overruns.
Distinguishing flipping from real estate investing.

As Victor Menasce, I hope this gives you a comprehensive understanding of the flipping sector in today’s environment. Make informed decisions, have an extraordinary day, and make great things happen!

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